FACTS: Petitioner Nari Gidwani is the President of GG Sportswear Manufacturing Corp. (GSMC) engaged in the export
of ready-to-wear clothes. GSMC secured the services of El Grande Industrial Corp. (El Grande) for which it issued
various checls as payment for the latter’s services. Upon presentment, the checks were dishonored by the drawee
bank. Thus, El Grande sent GSMC demand letters for the issued checks. In its response, the Petitioner informed El
Grande that it filed a Petition for the Declaration of a State of Suspension of Payments with the Securities and
Exchange Commission (SEC). On 03 September 1997, days before the demand on the checks was made by El Grande,
the SEC ordered the suspension of all claims until further order. Thus, GSMC did not pay El Grande. Despite that, El
Grande presented the checks which were dishonored.
Thereafter, El Grande filed a complaint against the Petitioner for violation of Bouncing Checks Law. In the
Metropolitan Trial Court (MTC), the Petitioner was found guilty. On appeal, the Regional Trial Court (RTC) affirmed
the decision of the MTC and denied the Motion for Reconisderation of the Petitioner. In the Court of Appeals (CA),
the Petition for Review was partly granted, finding that the Petitioner is still guilty for the remaining two (2) counts
of violation of the Bouncing Checks Law.
Thus, the present petition.
ISSUE: Whether or not the Petitioner violated the Bouncing Checks Law.
RULING: NO. The Supreme Court held that the Bouncing Checks Law was enacted in order to prevent damage to
trade, commerce, and banking caused by worthless checks. The law is not intended to coerce a debtor to pay his
debut. Rather, the law prohibits the making and circulation of worthless checks. Further, an accused cannot be
deemed excused from honoring the issued checks by the mere filing of the petition for suspension of payments
before the SEC. Otherwise, it will result to an absurd situation where one who has engaged in criminal conduct could
escape punishment by the mere filing of a petition for rehabilitation by the corporation of which he is an officer.
Furthermore, the presentment for payment and the dishonor of the checks take place before the Petitioner for
Suspension of Payments for Rehabilitation Purposes was filed with the SEC; thus, there was already an obligation to
pay the amount covered by the checks.
In the present case, the Court found that there was already a lawful order from the SEC suspending all payment
claims prior to the presentment for payment and demand to the Petitioner. The said order resulted for the contract
to be deemed as suspended. When a contract is a subject to a suspensive condition, it temporarily ceases to be
operative. Thus, at the time El Grande presented the checks for encashment, it had no right to do so since there was
not obligation due from the Petitioner.
Petition was GRANTED. Decision and Resolution of the CA were REVERSED and SET ASIDE. Criminal action against the
Petitioner were DISMISSED, without prejudice to the right of El Grande to fil proper civil action.